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Income Taxes
 12 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of federal and state income taxes included in the Consolidated Statements of Income are as follows:
 Year Ended September 30
 202320222021
 (Thousands)
Current Income Taxes —
Federal$11,744 $— $(10)
State1,386 12,214 8,699 
Deferred Income Taxes —
Federal106,801 137,025 90,970 
State44,602 (32,610)15,023 
Total Income Taxes$164,533 $116,629 $114,682 
On July 8, 2022, House Bill 1342 was signed into law in Pennsylvania. The law reduces the corporate income tax rate to 8.99% for fiscal 2024. Starting with fiscal 2025, the rate is reduced by 0.5% annually until it reaches 4.99% for fiscal 2032. Under GAAP, the tax effects of a change in tax law must be recognized in the period in which the law is enacted. GAAP also requires deferred income tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. During fiscal 2022, the Company's deferred income taxes were initially re-measured based upon the new tax rates. For the Company's non-rate regulated activities, the change in deferred income taxes was $28.4 million as of the enactment date and was recorded as a reduction to income tax expense. For the Company's rate regulated activities, the reduction in deferred income taxes of $37.2 million was recorded as a decrease to Recoverable Future Taxes of $19.8 million and an increase to Taxes Refundable to Customers of $17.4 million
during the quarter ended September 30, 2022. As the rate reduction occurs through fiscal 2032, an annual re-measurement will be made. This amount is reflected in State Income Taxes.
On August 16, 2022, the "Inflation Reduction Act" (IRA) was signed into law. The IRA, among other things, includes provisions to expand energy incentives and impose a corporate minimum tax. The provisions of the IRA did not have a material impact on the accompanying financial statements, although some of the provisions may be applicable in future years.
Total income taxes as reported differ from the amounts that were computed by applying the federal income tax rate to income before income taxes. The following is a reconciliation of this difference:
 Year Ended September 30
 202320222021
 (Thousands)
U.S. Income Before Income Taxes$641,399 $682,650 $478,329 
Income Tax Expense, Computed at
U.S. Federal Statutory Rate of 21%
$134,694 $143,357 $100,449 
State Valuation Allowance (1)— (24,850)(5,560)
State Income Taxes (2)36,331 8,736 24,300 
Amortization of Excess Deferred Federal Income Taxes(6,053)(5,184)(5,215)
Plant Flow Through Items(2,856)(814)(1,503)
Stock Compensation957 820 2,239 
Federal Tax Credits(6)(5,701)(310)
Miscellaneous1,466 265 282 
Total Income Taxes$164,533 $116,629 $114,682 
(1)During fiscal 2022, the valuation allowance recorded against certain state deferred tax assets was removed. See discussion below.
(2)The state income tax expense shown above includes adjustments to the estimated state effective tax rates utilized in the calculation of deferred income taxes, including the Pennsylvania rate change discussed above.
Significant components of the Company’s deferred tax liabilities and assets were as follows:
 At September 30
 20232022
 (Thousands)
Deferred Tax Liabilities:
Unrealized Hedging Gains$3,385 $— 
Property, Plant and Equipment1,178,893 954,757 
Pension and Other Post-Retirement Benefit Costs44,358 30,132 
Other21,470 48,893 
Total Deferred Tax Liabilities1,248,106 1,033,782 
Deferred Tax Assets:
Unrealized Hedging Losses— (215,187)
Tax Loss and Credit Carryforwards(33,744)(50,686)
Pension and Other Post-Retirement Benefit Costs(41,843)(37,250)
Other(48,349)(32,430)
Total Deferred Tax Assets(123,936)(335,553)
Total Net Deferred Income Taxes$1,124,170 $698,229 
The following is a summary of changes in valuation allowances for deferred tax assets:
 Year Ended September 30
 202320222021
 (Thousands)
Balance at Beginning of Year$— $57,645 $63,205 
Additions— — — 
Deductions— 57,645 5,560 
Balance at End of Year$— $— $57,645 
A valuation allowance for deferred tax assets, including net operating losses and tax credits, is recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. The Company, at each reporting date, assesses the realizability of its deferred tax assets, including factors such as future taxable income, reversal of existing temporary differences, and tax planning strategies. The Company considers both positive and negative evidence related to the likelihood of the realization of the deferred tax assets. On June 30, 2022, the Company completed the sale of Seneca's California oil and gas assets to Sentinel Peak Resources California, LLC. As a result of the sale of the California oil and gas assets, the remaining deferred tax assets and valuation allowance of approximately $27.2 million related to the California net operating loss and tax credit carryforwards were written off, as the Company determined that there was a remote possibility for use as the Company no longer has California operations. During the quarter ended September 30, 2022, the valuation allowance was adjusted because of the Pennsylvania corporate income tax rate change remeasurement described above and for current activity, for a cumulative adjustment of $5.5 million. In addition, the Company determined there was sufficient positive evidence, despite a prior history of subsidiary tax losses, to conclude that it was more likely than not that the remaining state deferred tax assets would be realized. The conclusion was primarily related to the use of net operating losses in Pennsylvania in 2022 due to sustained strong operating results as well as the expectation for future forecasted earnings in Pennsylvania. The sale of California assets also resulted in higher apportionment of income to Pennsylvania on a prospective basis, which further supported realization of existing Pennsylvania net operating loss deferred tax assets. Accordingly, as of September 30, 2022, the Company reversed the remaining valuation allowance and recognized an income tax benefit of approximately $24.9 million.
Regulatory liabilities representing the reduction of previously recorded deferred income taxes associated with rate-regulated activities that are expected to be refundable to customers amounted to $268.6 million and $362.1 million at September 30, 2023 and 2022, respectively. Also, regulatory assets representing future amounts collectible from customers, corresponding to additional deferred income taxes not previously recorded because of ratemaking practices, amounted to $69.0 million and $106.2 million at September 30, 2023 and 2022, respectively. The primary change in these was due to Distribution Corporation's rate settlement in Pennsylvania. For further discussion of Distribution Corporation rate matters, refer to Note F — Regulatory Matters.
The Company is in the Compliance Maintenance Phase of the IRS Compliance Assurance Process (“CAP”) for fiscal 2023. The CAP program is intended for taxpayers with a low risk of non-compliance who are cooperative and transparent with few, if any, material issues that require resolution. The federal statute of limitations remains open for fiscal 2020 and later years. The Company is also subject to various routine state income tax examinations. The Company’s principal subsidiaries have state statutes of limitations that generally expire between three to four years from the date of filing of the income tax return. Net operating losses being carried forward from prior years remain subject to examination on a future return until they are utilized, upon which time the statute of limitation begins. The Company has no unrecognized tax benefits as of September 30, 2023, 2022, or 2021.
During fiscal 2009, preliminary consent was received from the IRS National Office approving the Company’s application to change its tax method of accounting for certain capitalized costs relating to its utility property, subject to final guidance. The IRS released guidance on April 14, 2023, providing a natural gas transmission and distribution property safe harbor method of accounting (“NGSH method”) that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized or be allowable as deductions for repairs. The Company is planning to elect this change in tax accounting method with its consolidated tax return filing in the upcoming year and has reflected an estimate in the September 30, 2023 financial statements of what is intended to be treated as a repair for tax purposes rather than being capitalized. That estimate, which amounted to $99.5 million, has been recorded in Income Tax Expense.
Tax carryforwards available, prior to valuation allowance, at September 30, 2023, were as follows:
JurisdictionTax AttributeAmount
(Thousands)		Expires
PennsylvaniaNet Operating Loss$404,403 2031-2043
FederalGeneral Business Credits$1,819 2042